Eagle County loan program remains on hold

EAGLE COUNTY, Colorado – Eagle County’s energy “smart loan” program was supposed to improve local homes’ energy efficiency and provide a boost to the companies that would do the work. But the program remains on hold because the nation’s largest home-loan agencies believe they create too much risk for lenders.

The latest roadblock for the plan comes from the Federal Housing Finance Agency, which Tuesday released a “Statement on Certain Energy Retrofit Loan Programs.”

That letter states that the programs create “significant safety and soundness concerns that must be addressed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.” That statement has further delayed rolling out the local loan program.

Eagle County’s program was stalled before it began, due first to a “lender letter” in May from Fannie Mae, one of the two federally backed (and mostly federally owned these days) agencies that re-purchase mortgages. That letter stated the agencies would no longer re-purchase mortgages that had “smart loans” attached to the property.

The problem detailed in the lender letter is that since the loans are repaid through property taxes, that creates another “senior lien” on the property, pushing the lender farther back in line in case an owner defaults.

After the lender letter was issued, state and local governments objected, claiming, among other things, that the loans are no different than any other sort of special assessment attached to property taxes, such as membership in local improvement districts that repair sidewalks or move overhead utility lines underground.

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Political pressure was applied by senators, governors and even Vice President Joe Biden in hopes Fannie would provide more clear directions about the loans.

“We have clarification, but it’s not what we were hoping for,” Eagle County Planner Adam Palmer said.

In the wake of Tuesday’s statement, the political pressure has turned up even more, with California Gov. Arnold Schwarzenegger the latest to send a letter to the agencies.

Palmer said the county is likely to wait until the politicians and bankers resolve the dispute before the local loan program will begin.

“And that means that people who have non-Fannie loans won’t be able to move forward, either,” Palmer said.